Rightmove has reported a small rise of 0.4% (+£1,118) in price of property coming to market in May.
However, an 80% uplift in March transaction numbers has left behind a property drought and price surge, the firm warned, with a 6.2% (+£11,298) monthly jump in price of typical first-time buyer properties.
Rightmove sees strong demand continuing in this sector despite the withdrawal of many investors following the introduction of
higher stamp duty taxes; however, new-to-the-market supply is down 1.5% year-on-year.
First-time buyer regional hotspots are led by Croydon, Dartford and Luton, all with annual surges of over 18%.
Miles Shipside, Rightmove director and housing market analyst, said: “If you were expecting a long period of price doldrums at the lower end of the market following the mass exit of the buy-to-let brigade, this month’s 6.2% price rise will come as a big surprise. Properties at the lower end of the market were the most common target for the investor community, and the immediate aftermath of the tax deadline saw new seller asking prices drop in this sector for just one month.
“The 1.4% fall reported in April’s index appears to have been a very short-lived knee-jerk, with an average price surge of £11,298 this month for properties coming to market with two bedrooms or fewer. It remains to be seen if these prices can be achieved and there may be some over pricing in the market; it is also a reflection of better quality property coming to market in this sector which is now targeting owner-occupiers rather than landlords.”
In the period between the November announcement of a stamp duty rise and its implementation at the end of March, the price of property coming to market in this first-time buyer/investor sector increased by 3.0%. In just four weeks it has now risen by 6.2%, the highest monthly rise recorded for this sector since February 2012. Demand for typical entry- level property remains high, with searches on Rightmove specifying two bedrooms or fewer being up by 47% this April compared to April 2015 in spite of waning investor interest. In contrast, fresh supply for this sector is down by 1.5% in the last four weeks compared to the same period a year ago. While the price of a first home is accelerating, motivation to get on to the housing ladder is buoyed by the increasing cost of renting, better availability of mortgage products, and deposits gifted by family.
Shipside said: “Buy-to-let investors have had a bricks and mortar feast between the Chancellor’s announcement in November and the tax deadline at the end of March, and the result is a famine of suitable property and higher prices. First-time buyers are still eager to secure some of the very limited suitable supply in many parts of the country. Estate agents have perhaps been focused on getting investor sales through to completion before the tax hike, and some may have been surprised by the continuing momentum and scarcity of stock to meet ongoing demand.
“The net effect is eye-watering increases in asking prices in some towns, and is further stretching first-time buyers’ affordability even though they are competing against fewer buy-to-let investors in the market.”
Jeremy Duncombe, director of Legal & General Mortgage Club, added: “Interestingly, these figures from Rightmove show that the buy-to-let rush has caused a chain reaction in the housing market, driving house prices even further upwards this month and pushing the dream of owning a home further away from the grasp of many. The relentless increase raises the issue of affordability in this country, particularly in the south of the UK.
“In order to tackle this growing problem more homes need to be built in areas of high demand. To satisfy the needs of prospective borrowers, the industry needs to work together, to increase supply and ensure that much of the population is able to afford the home they want.”
